Glossary for fleet managers: common company car terms explained

If you're new to fleet management or are in the process of choosing your first company car, you'll probably have noticed that there's a confusing alphabet soup of acronyms, initialisms and abbreviations relating to their use.

Don't worry, though – this A to Z (well, AFR to WLTP) explains the most common terms you'll come across in the world of fleet and company cars.

For each phrase, we'll give you a brief description of what it means, and in many cases a link to a more detailed explanation or advice page.

Remember, there are lots more fleet car tips and guides on the What Car? company cars hub.

Read more fleet and company car advice

AFRs – advisory fuel rates

If you use your company car on business trips, the advisory fuel rate is the amount you can claim back to cover the cost of fuel. Rates are reviewed on a quarterly basis, at the start of March, June, September, and December. They vary according to the fuel your car uses and the size of its engine. For more info and current rates, see our advisory fuel rates guide

AFV – alternatively fuelled vehicle

In short, this term refers to vehicles that don’t run on petrol and diesel. So, it covers electric cars, or vehicles with a combustion engine that run on liquefied petroleum gas (LPG) or even compressed natural gas (CNG). See our best electric company cars page

APR – annual percentage rate

If you’ve skipped the company car and have bought your own car on finance, the APR is the amount of interest you pay each year to borrow the money.

BCH – business contract hire

Business contract hire is a way for companies to lease a vehicle that will be used as a fleet car. For more information, see our business contract hire guide

BEV – battery electric vehicle

Battery electric vehicles – i.e. electric cars and electric vans – have become the darlings of the fleet-car marketplace, because their exceptionally low company car tax rates make them very attractive to business car users. However, BEV cars tend to have higher leasing costs than conventionally fuelled cars, so you need to make sure your employer is happy to pay the extra. For more info, see our guide to running an electric company car

BIK – benefit in kind

Benefit-in-kind is the term used by HMRC (His Majesty's Revenue & Customs) for any benefit you receive on top of your salary. Benefit-in-kind tax tends to apply to a fleet car that you can use outside of work for private mileage. For more information, see our BIK tax guide

Car allowance

If you don’t want a company car, some employers offer an allowance towards buying and running your own car instead. There are positives and negatives to this. To help you decide what option is best for you, see our company car or car allowance guide 

Diesel surcharge

Diesel has become a bit of a pariah fuel over the past few years, with people viewing it as a dirty option. The reality is somewhat different, but nevertheless, a 4% surcharge has applied since 2018 to cars that do not meet the latest RDE2 emissions standard (explained below). The good news is that all cars built since January 2021 do meet those standards.

EV – electric vehicle

An EV is the same as a BEV (see above).

Grey fleet

"Grey fleet" is a catch-all name for private cars that are used for business purposes. These are not company cars, but are not simply private vehicles either. The advantages are that you can run any car you like, not one dictated by your employer’s company car choice list. The bad news is that maintenance costs will come out of your pocket, and not your employer’s.

HEV – hybrid electric vehicle

These cars combine an engine with an electric motor and a battery, and can usually run for a short distance on electricity alone, but not as far as a PHEV (see below).

Income tax

There are three income tax bands – the lower 20% rate, a higher 40% rate, and the top 45% rate. The higher your salary, the higher the rate you pay. These rates have a direct effect on how much you pay in company car tax.

kW – kilowatt

Kilowatts are used to quantify the power of an electric motor. In essence, it’s the sparky equivalent of brake horsepower. Electric car charging speeds are rated in kWs.

kWh – kilowatt hour

A kilowatt hour is the unit of measure for an electric vehicle battery’s capacity.

LCV – light commercial vehicle

An LCV is a commercial vehicle that weighs less than 3500kg.

MAP – mileage allowance payments

These are government-mandated tax-free amounts that you can claim if you use your own vehicle for business mileages. You can claim 45p per mile for the first 10,000 miles you cover in a tax year, then 25p per mile thereafter. See our mileage allowance payments guide

MHEV – mild-hybrid electric vehicle

Like a HEV, an MHEV has a motor and battery as well as an engine, but cannot run on electricity alone. See our mild hybrids guide

NEDC – new European driving cycle

This stands for the New European Driving Cycle, which is the old standard for working out a car’s emissions and economy. It was ditched in 2017 in favour of the WLTP (see below), because the old system was deemed so inaccurate. However, CO2 figure from the NEDC system remain in use for tax purposes on cars registered before 6 April 2020.

P11d

The P11d is a tax form, but in fleet car circles it describes the value of a new company car. The P11d price is the list price, plus delivery charges, and also the cost of any options added, and VAT. The first year's road tax (VED) and the registration fee are not included in the price.

PHEV – plug-in hybrid electric vehicle

PHEV stands for plug-in hybrid electric vehicle. A PHEV is a hybrid vehicle with a larger battery that can travel much further on electric power alone than other types of hybrid. As a result, BIK rates are much lower for PHEVs than for traditional petrol and diesel cars, HEVs and MHEVs, especially if the PHEV can travel a decent distance on electric power alone.

RDE2 – Real Driving Emissions 2

RDE stands for Real Driving Emissions tests and the "2" means we're talking about the second-generation standard. RDE2 tests are run alongside the lab-based WLTP tests, to make sure cars don’t produce significantly more pollutants in the real world than in a lab. RDE2 allows an engine to emit 1.5 times the amount of NOx emissions permitted in lab testing.

SDP and SDP+C

This is a classification of car insurance. An insurance policy that stipulates SDP use only, means social, domestic and pleasure use. An SDP+C policy also allows commuting, so it’s vital that you make sure you have the correct policy for your needs. For more info, see our fleet car insurance guide

Tax band

The BIK tax bands of fleet cars are based on their CO2 emissions. Range is also a factor for PHEVs. Tax bandings for diesel cars vary depending on whether or not the car meets the RDE2 emissions standard (see above). To check any car model's BIK rate, see our company car tax calculator 

ULEZ – ultra-low emissions zone

Ultra-low emissions zones are springing up in cities all over the country. Under a ULEZ scheme, you will be charged to enter the area it covers if your car doesn’t meet specified emissions criteria.

VED – vehicle excise duty

Vehicle excise duty is what used to be known as road tax. Your vehicle’s emissions dictate how high the annual bill is.

WLTP – Worldwide harmonised light vehicle test procedure

The WLTP test is used to work out a car's official fuel economy and emissions figures. It replaced the old NEDC protocol (see above). Car manufacturers must now publish WLTP CO2 emissions as well as WLTP fuel economy figures for all new models. See our Real MPG calculator for an independent view of a car's efficiency.

Read more: How does company car insurance work?

Read more: What is fair wear and tear for a company car?

Read more: Fleet manager responsibilities explained

Read more fleet and company car advice

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